How to manage Liabilities

Overview

• Loans

• Mortgages

• Commitments

• Capture interest rate details for liabilities, including percentage, frequency, and type (fixed or variable).

• ORCA automatically calculates interest outstanding and accrued interest.

• Displayed in the Details View and Structure Lines.

• To enable calculation, add a date to the interest rate event.

How to create a Liability with Interest rates

• Use the sentence builder to create a new event.

• Start from the perspective of the “loan provider”.

• Use the verb 'lent'.

• Input the ‘Counterparty’.

• Provide the date of when the loan was lent.

• Blend in the Liability after creating the new event. The Liability filter is found at the top of the structure chart.

• Click on the Liability line to see the details of the Loan.

Editing the Loan details

• Issue Date: This is when the loan or investment begins.

• Maturity Date: The due date for the final payment, marking the end of the loan or investment period. For example, if you take out a personal loan with a 36-month term, your maturity date would be 36 months from the day you received the loan
• If you took out a personal loan with a 36-month term on January 1, 2024, your maturity date would be January 1, 2027. That’s when the loan should be fully paid off. 

Example for Fixed rate:

Example Variable rate Scenario with yearly frequency

• Principal: $100,000

• Benchmark Rate (e.g., LIBOR): 3%

• Spread: 2%

• Total Interest Rate: 3% (LIBOR) + 2% (Spread) = 5%

Calculation for One Year

• Yearly Interest Rate: 5% annually

• Interest for the Year: $100,000 × 5% = $5,000

So, for a principal of $100,000 with a variable interest rate of 5% (3% LIBOR + 2% spread), the interest for one year would be $5,000.

If the benchmark rate changes, the total interest rate and the yearly interest amount will adjust accordingly. For example, if the LIBOR increases to 4%, the new total interest rate would be 6% (4% LIBOR + 2% spread), and the yearly interest would be:

• New Yearly Interest Rate: 6% annually

• New Interest for the Year: $100,000 × 6% = $6,000

5% Variable

6% Variable

 

Calculating the Interest Outstanding and Accrued Interest

Understand how Accrued Interest and Interest Outstanding are calculated

*Note* A tooltip is displayed on hover to explain the Accrued Interest Calculation (Screenshot)

Accrued Interest is calculated based on the period and the number of days within that period.

• [OUTSTANDING PRINCIPAL] x [INTEREST RATE] X [ CURRENT DATE - BEGINNING OF PERIOD] / [PERIOD] - [INTEREST RATE PAID IN THAT PERIOD].

• Where PERIOD
• monthly = number of days of current month
• quarterly = number of days of current quarter
• yearly = number of days of current year

Interest Outstanding is the difference between the expected interest amount paid and the actual interest amount paid.

• EXPECTED INTEREST AMOUNT PAID - INTEREST AMOUNT PAID, where
• EXPECTED INTEREST AMOUNT PAID = SUM of [OUTSTANDING PRINCIPAL] x [INTEREST RATE] per period until last full period
• INTEREST AMOUNT PAID = SUM of amounts for interest payment

How to use the sentence builder to pay the Loan

• Action of ‘received back’ or ‘paid back’ depending the perspective you are in.

• There is a field for the Interest payment as well.

• Input the date of payment, add notes or attach a relevant document
 

Other Liabilities Guides

Creating a mortgage with collateral

• Create the mortgage using the legal counterparty of the lender

• Use the verb 'has a mortgage of'

• Create the ‘lender’ as the counterparty

• Use the 'House' as collateral

Overview of All Outstanding Liabilities

• Click on a card that has a liability you are looking for and select 'Liabilities'.

• At the top, you will see all outstanding liabilities for this card.



 

How to blend Liabilities into the structure chart

• First, blend in all liabilities.

• Next, click the button located at the bottom right corner.

• Finally, select 'Liabilities' from the options.

Did you know